Foreign Exchange Management Act Notification

Foreign Exchange Management
(Deposit) Regulations, 2000

Notification No.FEMA 5 /2000-RB
dated 3rd May 2000

RESERVE BANK OF INDIA
( EXCHANGE CONTROL DEPARTMENT )

CENTRAL OFFICE

Mumbai 400 001

In exercise of the powers conferred by
clause (f) of sub-section (3) of section 6, sub-section (2) of section
47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve
Bank makes the following regulations relating to deposits between a
person resident in India and a person resident outside India, namely:

1.

Short title and commencement :-

i)

These regulations may be called the Foreign
Exchange Management (Deposit) Regulations, 2000.

ii)

They shall come into force on 1st day of
June, 2000

2.

Definitions :-

In these Regulations, unless the context
otherwise requires, -

i)

'Act' means the Foreign Exchange Management
Act, 1999 (42 of 1999);

ii)

'authorised bank' means a bank including
a co-operative bank (other than an authorised dealer) authorised by
the Reserve Bank to maintain an account of a person resident outside
India;

iii)

'authorised dealer' means a person authorised
as an authorised dealer under sub-section (1) of section 10 of the Act;

iv)

'Deposit' includes deposit of money with
a bank, company, proprietory concern, partnership firm, corporate body,
trust or any other person;

'Non-Resident Indian (NRI)' means a person
resident outside India who is a citizen of India or is a person of Indian
origin; vii) 'NRE account' means a Non-Resident External account referred
to in clause (i) of sub-regulation (1) of Regulation 5;

'Overseas Corporate Body (OCB)' means a
company, partnership firm, society and other corporate body owned directly
or indirectly to the extent of at least sixty per cent by Non-Resident
Indians and includes overseas trust in which not less than sixty percent
beneficial interest is held by Nonresident Indians directly or indirectly
but irrevocably;

xii)

'Person of Indian Origin' means a citizen
of any country other than Bangladesh or Pakistan, if

a)

he at any time held Indian passport;

or

b)

he or either of his parents or any of his
grand- parents was a citizen of India by virtue of the Constitution
of India or the Citizenship Act, 1955 (57 of 1955);

or

c)

the person is a spouse of an Indian citizen
or a person referred to in sub-clause ( a ) or (b);

xiii)

'Schedule' means schedule to these Regulations;

xiv)

the words and expressions used but not
defined in these Regulations shall have the same meanings respectively
assigned to them in the Act.

3.

Restrictions on deposits between a person
resident in India and a person resident outside India :-

Save as otherwise provided in the Act or
Regulations or in rules, directions and orders made or issued under
the Act, no person resident in India shall accept any deposit from,
or make any deposit with, a person resident outside India:

Provided that the Reserve Bank may, on
an application made to it and on being satisfied that it is necessary
so to do, allow a person resident in India to accept or make deposit
from or with a person resident outside India.

4.

Exemptions :-

Nothing contained in these Regulations
shall apply to the following:

1)

Deposits held in rupee accounts maintained
by foreign diplomatic missions and diplomatic personnel and their family
members in India with an authorised dealer.

2)

Deposits held by diplomatic missions and
diplomatic personnel in special rupee accounts namely Diplomatic Bond
Stores Account to facilitate purchases of bonded stocks from firms and
companies who have been granted special facilities by customs authorities
for import of stores into bond, subject to following conditions:

a)

Credits to the account shall be only by
way of proceeds of inward remittances received from outside India through
normal banking channels or by a transfer from a foreign currency account
in India of the account holder maintained with an authorised dealer
in accordance with clause 3 of this Regulation ;

Debits to the accounts shall be for local
disbursements, or for payments for purchases of bonded stocks to firms
and companies who have been granted special facilities by customs authorities
for import of stores into bond;

d)

The funds in the account may be repatriated
outside India without the approval of Reserve Bank

3)

Deposits held in accounts maintained in
foreign currency by diplomatic missions and diplomatic personnel in
India subject to the following conditions:

a)

Credits to the account shall be only by
way of proceeds of inward remittances received from outside India through
normal banking channels;

b)

Funds held in such account if converted
in rupees shall not be converted back into foreign currency;

c)

The account may be held in the form of
current or term deposit account, and in the case of diplomatic personnel,
may also be held in the form of savings account;

d)

The rate of interest on savings or term
deposits shall be such as may be determined by the authorised dealer
maintaining the account;

e)

The funds in the account may be repatriated
outside India without the approval of Reserve Bank.

4)

Deposits held in accounts maintained in
rupees with an authorised dealer by persons resident in Nepal and Bhutan;

5)

Deposits held in accounts maintained with
an authorised dealer by the United Nations Organisation and its subsidiary/affiliate
bodies in India, and its or their officials in India.

Without prejudice to sub-regulation (1),
deposits under NRE, NRO and NRSR Account Schemes referred to in clauses
(i), (iii) and (v) of that sub-regulation, may also be accepted by an
authorised bank, in accordance with the provisions contained in the
respective Schedules.

6.

Other deposits made or held by authorised
dealer :-

A deposit made by an authorised dealer
with his branch, head office or correspondent outside India, and a deposit
made by a branch or correspondent outside India of an authorised dealer,
and held in his books in India, shall be governed by the directions
issued by the Reserve Bank in this regard from time to time.

7.

Acceptance of deposits by persons other
than authorised dealer/ authorised bank :-

1)

A company registered under Companies Act,
1956 or a body corporate or created under an act of Parliament or State
Legislature may accept deposits from a nonresident Indian on repatriation
basis, subject to the terms and conditions mentioned in Schedule
6.

2)

An Indian company, a proprietorship concern
or a firm in India may accept deposits from a non-resident Indian on
non-repatriation basis, subject to the terms and conditions mentioned
in Schedule 7.

8.

Deposits in certain other cases :-

1)

Subject to compliance with the conditions
in regard to raising of external commercial borrowings or raising of
resources through American Depository Receipts (ADRs) or Global Depository
Receipts (GDRs), the funds so raised may, pending their utilisation
or repatriation to India, be held in deposits in foreign currency accounts
with a bank outside India.

2)

Deposits accepted by an Indian company
by issue of Commercial Paper to a Non-Resident Indian or an Overseas
Corporate Body shall be subject to the following conditions, namely:

a)

the issue is in due compliance with the
Non-Banking Companies (Acceptance of Deposits through Commercial Paper)
Directions, 1989 issued by the Reserve Bank as also any other law, rule,
directions, orders issued by the Government or any other regulatory
authority, in regard to acceptance of deposits by issue of Commercial
Paper;

b)

payment for issue of Commercial Paper is
received by the issuing company by inward remittance from outside India
through normal banking channels or out of funds held in a deposit account
maintained by a Non-Resident Indian or an Overseas Corporate Body in
accordance with the Regulations made by Reserve Bank in that regard;

c)

the amount invested in Commercial Paper
shall not be eligible for repatriation outside India; and

d)

the Commercial Paper shall not be transferable.

9.

Acceptance of deposits by authorised dealer
with the prior approval of Reserve
Bank :-

With the prior approval of Reserve Bank,
an authorised dealer may open an account expressed in foreign currency
in the name of a person resident outside India for the purpose of adjustment
of value of goods imported into India against the value of goods exported
from India in terms of an arrangement voluntarily entered into by such
person with a person resident in India.

10.

Nomination :-

Authorised dealers may provide nomination
facility in respect of the following deposit accounts:

The Non-resident Indians(NRIs) and Overseas
Corporate Bodies(OCBs) are permitted to open and maintain these accounts
with authorised dealers, and with banks (including cooperative banks)
authorised by the Reserve Bank to maintain such accounts.

The account should be opened by the non-resident
account holder himself and not by the holder of the power of attorney
in India.

Note:

Opening of NRE accounts in the names of
individuals/entities of Bangladesh/Pakistan nationality/ownership requires
approval of Reserve Bank.

2.

Types of accounts:

The accounts may be maintained in any form,
e.g. savings, current, recurring or fixed deposit account etc.

3.

Permitted Credits:

a)

Proceeds of remittances to India in any
permitted currency.

b)

Proceeds of personal cheques drawn by the
account holder on his foreign currency account and of travellers cheques,
bank drafts payable in any permitted currency including instruments
expressed in Indian rupees for which reimbursement will be received
in foreign currency, deposited by the account holder in person during
his temporary visit to India, provided the authorised dealer/bank is
satisfied that the account holder is still resident outside India, the
travellers' cheques/drafts are standing/endorsed in the name of the
account holder and in the case of travellers' cheques, they were issued
outside India.

c)

Proceeds of foreign currency/bank notes
tendered by account holder during his temporary visit to India, provided
(i) the amount was declared on a Currency Declaration Form (CDF), where
applicable, and (ii) the notes are tendered to the authorised dealer
in person by the account holder himself and the authorised dealer is
satisfied that account holder is a person resident outside India.

d)

Transfers from other NRE/FCNR accounts.

e)

Interest accruing on the funds held in
the account.

f)

Interest on Government securities and dividend
on units of mutual funds, provided the securities/units were purchased
by debit to the account holder's NRE/FCNR account or out of inward remittance
through normal banking channels.

g)

Maturity proceeds of Government securities
including National Plan/Savings Certificates as well as proceeds of
Government securities and units of mutual funds sold on a recognised
stock exchange in India and sale proceeds of units received from mutual
funds, provided the securities/units were originally purchased by debit
to the account holders's NRE/FCNR account or out of remittances received
from outside India in free foreign exchange.

h)

Refund of share/debenture subscriptions
to new issues of Indian companies or portion thereof, if the amount
of subscription was paid from the same account or from other NRE/FCNR
account of the account holder or by remittance from outside India through
normal banking channels.

i)

Refund of application/earnest money made
by the house building agencies on account of non-allotment of flat/plot,
together with interest, if any (net of income tax payable thereon),
provided the original payment was made out of NRE/FCNR account of the
account holder or remittance from outside India through normal banking
channels and the authorised dealer is satisfied about the genuineness
of the transaction.

j)

Any other credit if covered under general
or special permission granted by Reserve Bank.

4.

Permitted Debits:

a)

Local disbursements .

b)

Remittances outside India.

c)

Transfer to NRE/FCNR accounts of the account
holder or any other person eligible to maintain such account.

d)

Investment in shares/securities /commercial
paper of an Indian company or for purchase of immovable property in
India provided such investment/purchase is covered by the regulations
made, or the general/special permission granted, by the Reserve Bank.

e)

Any other transaction if covered under
general or special permission granted by the Reserve Bank.

5.

Rate of Interest:

Rate of interest applicable to these accounts
shall be in accordance with the directions/instructions issued by Reserve
Bank from time to time

6.

Loans against security of funds held in
the account :

a) To account holder:

Authorised dealers and banks maintaining
such accounts are permitted to grant loans in India to the account holder
for -

i)

personal purposes or for carrying on business
activities except for the purpose of relending or carrying on agricultural/plantation
activities or for investment in real estate business.. The authorised
dealer/bank should ensure that the advances are fully secured by the
fixed deposits and regulations relating to normal margin, interest rate,
etc. are complied with. Repayment shall be made either by adjustment
of the deposit or by fresh inward remittances from outside India through
normal banking channels. The loan can also be repaid out of local rupee
resources in the NRO account of the borrower. The interest on such loans
shall be in accordance with directives issued by Reserve Bank from time
to time ;

ii)

the purpose of making direct investment
in India on non-repatriation basis by way of contribution to the capital
of Indian firms/companies subject to compliance with the provisions
of the Foreign Exchange Management (Transfer of Indian security by a
person resident outside India) Regulations, 2000 and Foreign Exchange
Management (Investment in proprietary or a partnership firm) Regulations,
2000.

iii)

the purpose of acquisition of flat/house
in India for his own residential use subject to the provisions of the
relevant Regulations made under the Act.

(b) To third parties:

Authorised dealers and authorised banks
may grant any type of fund based and/or non-fund based facilities to
resident individuals/firms/ companies in India against the collateral
of fixed deposits held in NRE account subject to the following conditions:

i)

There should be no direct or indirect foreign
exchange consideration for the nonresident depositor agreeing to pledge
his deposits to enable the resident individual/firm/company to obtain
such facilities.

ii)

Regulations relating to margin, interest
rate, purpose of loan, etc., as stipulated by Reserve Bank from time
to time should be complied with.

iii)

The loan should be utilised for personal
purposes or for carrying on business activities other than agricultural/plantation
activities or real estate business. The loan should not be utilised
for relending.

iv)

The usual norms and considerations as applicable
in the case of advances to trade/industry shall be applicable to such
credit facilities.

(c) Loans outside India

Authorised dealers may allow their branches/correspondents
outside India to grant any type of fund based and/or non-fund based
facilities to or in favour of non-resident depositor or to third parties
at the request of depositor for bona fide purpose against the security
of funds held in the NRE accounts in India and also agree to remittance
of the funds from India, if necessary, for liquidation of the outstandings.

7.

Change of resident status of the account
holder:

NRE accounts should be redesignated as
resident accounts or the funds held in these accounts may be transferred
to the RFC accounts (if the account holder is eligible for maintaining
RFC account) at the option of the account holder immediately upon the
return of the account holder to India for taking up employment or for
carrying on business or vocation or for any other purpose indicating
intention to stay in India for an uncertain period. Where the account
holder is only on a short visit to India, the account may continue to
be treated as NRE account even during his stay in India.

8.

Repatriation of funds to non-resident nominee:

Authorised dealers/authorised banks may
allow remittance of funds lying in the NRE account of the deceased account
holder to his non-resident nominee.

9.

Miscellaneous:

a)

Joint accounts : Joint accounts in
the names of two or more non-resident individuals may be opened provided
all the account holders are persons of Indian nationality or origin.
When one of the joint holders becomes resident, the authorised dealer
may either delete his name and allow the account to continue as a NRE
account or redesignate the account as a resident account, at the option
of the account holders. Opening of these accounts by a non-resident
jointly with a resident is not permissible.

b)

Opening of account during temporary visit
: An account may be opened in the name of an eligible NRI during his
temporary visit to India against tender of foreign currency travellers
cheques or foreign currency notes and coins tendered, provided the authorised
dealer is satisfied that the person has not ceased to be a non-resident.

c)

Operations by Power of attorney : Authorised
dealers/authorised banks may allow operations on an NRE account in terms
of Power of Attorney or other authority granted in favour of a resident
by the non-resident account holder, provided such operations are restricted
to withdrawals for local payments. In cases where the account holder
or a bank designated by him is eligible to make investments in India,
the Power of Attorney holder may be permitted by authorised dealers
to operate the account to facilitate such investment. The resident Power
of Attorney holder shall not, however, be allowed to repatriate outside
India funds held in the account under any circumstances or make payment
by way of gift to a resident on behalf of the account holder or transfer
funds from the account to another NRE account.

d)

Special Series of Cheques: For easy identification
and quicker processing of cheques drawn on NRE accounts, authorised
dealers/banks shall issue cheque books containing a special series of
cheques to their constituents holding NRE accounts.

e)

Temporary overdrawings : Authorised dealers/authorised
banks may at their discretion/commercial judgement allow for a period
of not more than two weeks, overdrawings in NRE savings bank accounts,
upto a limit of Rs.50,000 subject to the condition that such overdrawings
together with the interest payable thereon are cleared/repaid within
the said period of two weeks, out of inward remittances through normal
banking channels or by transfer of funds from other NRE/FCNR accounts.

f)

Remittances abroad by Resident nominee
: Application from a resident nominee for remittance of funds outside
India for meeting the liabilities, if any, of the deceased account holder
or for similar other purposes, should be forwarded to the Reserve Bank
for consideration.

g)

Tax Exemption: Income from interest on
balances standing to the credit of NRE Accounts is exempt from Income
Tax. Likewise balances held in such accounts are exempt from wealth
tax.

h)

Reporting :

The transactions in these accounts shall
be reported to the Reserve Bank in accordance with the directions issued
by it from time to time.

SCHEDULE
2

[ See Regulation 5(1) (ii)
]

FOREIGN CURRENCY (NON-RESIDENT) ACCOUNT
(BANKS) SCHEME -FCNR(B)

1.

Eligibility :

(a)

NRIs and OCBs are eligible to open and
maintain these accounts with an authorised dealer.

NOTE : Opening of FCNR(B) accounts in the
names of NRIs/OCBs of Bangladesh/Pakistan nationality/ownership requires
approval of Reserve Bank.

(b)

These accounts may be opened with funds
remitted from outside India through normal banking channels or funds
received in rupees by debit to the account of a non-resident bank maintained
with an authorised dealer in India or funds which are of repatriable
nature in terms of the regulations made by Reserve Bank. Accounts may
also be opened by transfer of funds from existing NRE/FCNR accounts.

(c)

Remittances from outside India for opening
of or crediting to these accounts should be made in the designated currency
in which the account is desired to be opened/maintained. Without prejudice
to this, if the remittance is received in a currency other than the
designated currency (including funds received in rupees by debit to
the account of a non-resident bank), it should be converted into the
latter currency by the authorised dealer at the risk and cost of the
remitter and account should be opened/credited in only the designated
currency.

(d)

In case the depositor with any convertible
currency other than designated currency desires to place a deposit in
these accounts, authorised dealers may undertake with the depositor
a fully covered swap in that currency against the desired designated
currency. Such a swap may also be done between two designated currencies.

2.

Designated currencies :

Deposit of funds in the accounts may be
accepted in Pound Sterling, US Dollar, Deutsche Mark, Japanese Yen,
Euro and such other currencies as may be designated by Reserve Bank
from time to time.

3.

Type of account :

These accounts may be opened only in the
form of term deposit for any of the three maturity periods, viz. one
year and above but less than two years, two years and above but less
than three years and three years only.

4.

Rate of Interest :

The rate of interest on funds held in these
deposit accounts will be in accordance with the directives issued by
the Reserve Bank from time to time.

5.

Permissible Debits/Credits :

All debits/credits permissible in respect
of NRE accounts as specified in Schedule 1 shall
be permissible in respect of these accounts also.

6.

Rate for Conversion of Rupees into Designated
Currencies and vice versa :

i)

Remittances received in Indian rupees for
opening these accounts shall be converted by the authorised dealer into
the designated foreign currency at the clean T.T. selling rate for that
currency ruling on the date of conversion.

ii)

For the purpose of payment in rupees, funds
held in these accounts shall be converted into rupees at the authorised
dealer's clean T.T. buying rate for the concerned currency ruling on
the date of withdrawal.

7.

Inland Movement of Funds :

Any inland movement of funds for the purpose
of opening these accounts as well as for repatriation outside India
of balances held in these accounts will be free of inland exchange or
commission for the non-resident depositors. The Authorised dealer receiving
foreign currency remittances in these accounts will also, on request,
pass on the foreign currency to another authorised dealer if the account
has to be opened with the latter, at no extra cost to the remitter.

8.

Manner of Payment of Interest :

(i)

Interest on balances held in these accounts
may be paid half-yearly or on an annual basis as desired by the depositor.

(ii)

Interest may be credited to a new FCNR(B)
account or an existing/new NRE/NRO/NRNR/NRSR account in the name of
the account holder, at his option.

9.

Loans/overdrafts against security of funds
held in the account :

(1)

The terms and conditions as applicable
to NRE deposits (cf. Schedule 1) in respect of loans
and overdrafts in India to depositor and to third parties as also loans
outside India against security of deposits, shall apply mutatis mutandis
to FCNR(B) deposits.

(2)

The margin requirement shall be notionally
calculated on the rupee equivalent of the deposits.

10.

Change of resident status of the account
holder:

When an account holder becomes a person
resident in India, deposits may be allowed to continue till maturity
at the contracted rate of interest, if so desired by him. However, except
the provisions relating to rate of interest and reserve requirements
as applicable to FCNR(B) deposits, for all other purposes such deposits
shall be treated as resident deposits from the date of return of the
accountholder to India. Authorised dealers should convert the FCNR(B)
deposits on maturity into resident rupee deposit accounts or RFC account
(if the depositor is eligible to open RFC account), at the option of
the accountholder and interest on the new deposit (rupee account or
RFC account) shall be payable at the relevant rates applicable for such
deposits.

11.

Joint account, repatriation of balances,
etc. :

Terms and conditions as applicable to NRE
accounts (cf. Schedule 1) in respect of joint accounts,
repatriation of funds, opening account during temporary visit, operation
by power of attorney, loans/overdrafts against security of funds held
in accounts, shall apply mutatis mutandis to FCNR (B) accounts.

12.

Reporting :

The transactions in these accounts shall
be reported to Reserve Bank in accordance with the directions issued
by it from time to time.

13.

Other features :

(a)

Reserve Bank will not provide exchange
rate guarantee to authorised dealers for deposits of any maturity in
these accounts.

(b)

Lending of resources mobilised by authorised
dealers under these accounts are not subject to any interest rate stipulations.

NOTE :

Premature withdrawal of FCNR(B) deposits
for the purpose of opening NRNR Rupee Deposit accounts with an authorised
dealer other than the one with whom the account FCNR(B) is maintained
will attract penalty as per the directions issued by Reserve Bank from
time to time.

SCHEDULE
3

[ See Regulation 5(1)(iii)
]

NON-RESIDENT ORDINARY RUPEE(
NRO) ACCOUNT SCHEME

1.

Eligibility

(a)

Any person resident outside India may open
NRO account with an authorised dealer or an authorised bank for the
purpose of putting through bona fide transactions in rupees not involving
any violation of the provisions of the Act, rules and regulations made
thereunder.

(b)

The operations on the accounts should not
result in the account holder making available foreign exchange to any
person resident in India against reimbursement in rupees or in any other
manner.

(c)

At the time of opening of the account,
the account holder should furnish an undertaking to the authorised dealer/authorised
bank with whom the account is maintained that in cases of debits to
the account for the purpose of investment in India and credits representing
sale proceeds of investments, he will ensure that such investments/disinvestments
will be in accordance with the regulations made by Reserve Bank in this
regard.

B. Post Offices in India may maintain savings
bank accounts in the names of persons resident outside India and allow
operations on these accounts subject to the same terms and conditions
as are applicable to NRO accounts maintained with an authorised dealer/authorised
bank.

2.

Types of Accounts

NRO accounts may be opened/maintained in
the form of current, savings, recurring or fixed deposit accounts. The
requirements laid down in the directives issued by Reserve Bank in regard
to resident accounts shall apply to NRO accounts.

3.

Permissible Credits/Debits

(A)

Credits

(i)

Proceeds of remittances received in any
permitted currency from outside India through normal banking channels
or any permitted currency tendered by the account-holder during his
temporary visit to India or transfers from rupee accounts of nonresident
banks.

(ii)

Legitimate dues in India of the account
holder.

(B)

Debits

(i)

All local payments in rupees including
payments for investments subject to compliance with the relevant regulations
made by the Reserve Bank.

(ii)

Remittance outside India of current income
in India of the account holder net of applicable taxes.

4.

Remittance of funds held in NRO accounts

Balances in NRO accounts are not eligible
for remittance outside India without the approval of Reserve Bank. Funds
received by way of remittances from outside India in foreign exchange
which have not lost their identity as remittable funds will only be
considered by Reserve Bank for remittance outside India. Where an account
(current/ savings) is opened by a foreign tourist visiting India, with
funds remitted from outside India in a specified manner or by sale of
foreign exchange brought by him to India, authorised dealers may convert
the balance in the account at the time of departure of the tourist from
India into foreign currency for payment to the account holder provided
the account has been maintained for a period not exceeding six months
and the account has not been credited with any local funds, other than
interest accrued thereon.

5.

Grant of Loans/Overdrafts

A.

To Account holders

i)

Loans to non-resident account holders may
be granted in rupees against the security of fixed deposits subject
to usual norms as are applicable to resident accounts, for personal
purposes or for carrying on business activities except for the purpose
of relending or carrying on agricultural/plantation activity or for
investment in real estate business.

ii)

Authorised dealer/bank may permit overdraft
in the account of the account holder subject to his commercial judgement
and compliance with the interest rate etc. directives.

B.

To Third parties

Loans/overdrafts to resident individuals/firms/companies
in India may be granted against the security of deposits held in NRO
accounts, subject to the following terms and conditions.

(i)

The loans shall be utilised only for meeting
borrower's personal requirements and/or business purpose and not for
carrying on agricultural/plantation activities or real estate business,
or for relending.

(ii)

Regulations relating to margin and rate
of interest as stipulated by Reserve Bank from time to time shall be
complied with.

(iii)

The usual norms and considerations as applicable
in the case of advances to trade/industry shall be applicable for such
loans/ facilities.

6.

Treatment of Loans/Overdrafts in the event
of change in the resident status of the borrower

In case of person who had availed of loan
or overdraft facilities while resident in India and who subsequently
becomes a person resident outside India, the authorised dealer may at
their discretion and commercial judgement allow continuance of the loan/overdraft
facilities. In such cases, payment of interest and repayment of loan
may be made by inward remittance or out of legitimate resources in India
of the person concerned.

7.

Joint Accounts with Residents

The accounts may be held jointly with residents.

8.

Change of Resident Status of Account holder

(a)

From Resident to Non-resident

When a person resident in India leaves
India for a country (other than Nepal or Bhutan) for taking up employment,
or for carrying on business or vocation outside India or for any other
purpose indicating his intention to stay outside India for an uncertain
period, his existing account should be designated as a Non-Resident
(Ordinary) account.

(b)

From Non-resident to Resident

NRO accounts may be re-designated as resident
rupee accounts on the return of the account holder to India for taking
up employment, or for carrying on business or vocation or for any other
purpose indicating his intention to stay in India for an uncertain period.
Where the account holder is only on a temporary visit to India, the
account should continue to be treated as non-resident during such visit.

9.

Payment of funds to Non-resident Nominee

The amount due/payable to non-resident
nominee from the account of a deceased account holder, shall be credited
to NRO account of the nominee with an authorised dealer/authorised bank
in India.

10.

Reporting of transactions

i)

The transaction in the account which may
appear to represent reimbursement in rupees against foreign exchange
made available to a person resident in India other than authorised dealer,
as well as any other transaction of suspicious nature, should be reported
to Reserve Bank.

ii)

The transactions in these accounts shall
be reported to the Reserve Bank in accordance with the directions issued
by it from time to time.

SCHEDULE
4

[ See Regulation 5(1)(iv)
]

Non-Resident (Non-Repatriable)
Rupee Deposit Scheme

1.

Eligibility :

Any person resident outside India (except
individuals/entities of Pakistan/Bangladesh nationality/ownership) may
open NRNR accounts with an authorised dealer.

Accounts should be opened in Indian rupees
out of the funds remitted from outside India through normal banking
channels (in freely convertible currency). In the case of NRIs/OCBs,
such accounts may also be opened by transfer of funds from their existing
NRE/FCNR deposit accounts. Premature withdrawal of NRE/FCNR deposits
for opening NRNR deposits with an authorised dealer other than the one
with whom the NRE/FCNR account is maintained will attract penalty, if
any, as per the directions issued by Reserve Bank from time to time.

2.

Period of deposit :

The deposits may be held for periods ranging
from 6 months to 3 years.

3.

Rate of interest :

Banks are free to determine the rate of
interest on deposits under this scheme and on advances against funds
held in such deposits.

4.

Repatriability :

Only Interest accrued on the deposits is
repatriable.

5.

Renewal/Transfer :

The principal amount of deposit together
with interest accrued thereon may be renewed for a further period ranging
from 6 months to 3 years . If the interest accrued on an existing deposit
is invested under the Scheme, the amount of interest so invested, will
not be eligible for repatriation. The account can also be shifted from
one authorised dealer to another.

6.

Gift :

In the case of individual deposit holder,
the amount of deposit can be gifted to any resident/ non-resident or
to any Charitable Trust in India recognised under the Income Tax Act,
1961.

7.

Joint Accounts with residents :

Account may be held jointly with residents.

8.

Loans/overdrafts :

Loans/overdrafts in India, against the
security of these deposits may be granted by the authorised dealer to
account holders/third parties for personal purposes or for carrying
on business activities and not for carrying on agricultural/plantation
activities or real estate business, or for relending, subject to their
normal commercial judgement. Repayment of loans/liquidation of overdraft
to the account holder shall be by way of inward remittance from outside
India through normal banking channels or by debit to NRE/FCNR/NRO/NRNR/NRSR
account of the depositor or by adjustment against maturity proceeds
of deposit. Repayment of loans availed by third parties may be made
out of their own resources.

9.

Nomination :

An authorised dealer may register nomination
in favour of either a resident or nonresident. However, nomination in
favour of a non-resident may be registered subject to the condition
that the amount standing to the credit of the depositor, in the event
of his death, will be paid to the non-resident nominee only in Indian
rupees by credit to the nominee's NRO/NRNR/NRSR account and will not
be allowed to be remitted outside India.

10.

Reporting :

Transactions in these accounts shall be
reported to Reserve Bank in accordance with the directions issued by
it from time to time.

SCHEDULE
5

[ See Regulation 5(1)(v)
]

Non-resident (Special) Rupee
(NRSR) Account Scheme

1.

Eligibility :

i)

NRIs (other than nationals of Bangladesh/Pakistan)
who voluntarily undertake not to seek remittance of funds held in these
accounts as also income earned thereon are eligible to maintain NRSR
accounts with an authorised dealer.

ii)

These accounts shall carry the same facilities
and restrictions as are applicable to domestic accounts of residents
in respect of repatriation of funds held in the account and/or income
accrued thereon with an exception of investment in shares/securities
or immovable property or agricultural/plantation activities or real
estate business in India which shall be governed by the regulations
applicable to such investments by non-residents.

iii)

The directives issued by Reserve Bank in
regard to domestic accounts shall be applicable to these accounts.

2.

Application Form :

For the purpose of opening of these accounts,
an application shall be submitted to an authorised dealer in Form
NRSR appended to this Schedule.

3.

Type of accounts :

These accounts may be maintained in the
form of current, savings, recurring or fixed deposit account.

4.

Joint accounts :

These accounts may be held jointly with
residents.

5.

Rate of interest :

The interest rates as applicable to resident
accounts shall apply to these accounts.

6.

Change of resident status of the account
holder :

When a person resident in India becomes
a person resident outside India (other than Nepal and Bhutan) on account
of his taking up employment, or carrying on business or vocation outside
India or for any other purpose indicating his intention to stay outside
India permanently or for an uncertain period, the person concerned will
have the option of designating his existing domestic account as NRO
account or NRSR account.

7.

Nomination facility :

An authorised dealer may register nomination
in favour of either a resident or a non-resident. However, a non-resident
nominee will not be entitled to any remittance facility out of funds
held in NRSR account of the deceased account holder or income/interest
accrued thereon.

8.

Overdrafts in NRSR account:

Authorised dealer/authorised bank may permit
overdraft in the account of the account holder subject to his/its commercial
judgement

9.

Miscellaneous :

i)

The operations on these accounts may be
allowed freely as in the case of domestic accounts maintained by resident
individuals.

ii)

The account holders are also permitted
to freely transfer funds from NRO/NRE/FCNR accounts to NRSR accounts
but not vice versa.

SCHEDULE
6

[ See Regulation 7(1) ]

Acceptance of deposits by a company incorporated
in India (including a non-banking finance company registered with Reserve
Bank) on repatriation basis from a non-resident Indian or a person of
Indian origin resident outside India.

A company incorporated in India (including
a non-banking finance company registered with the Reserve Bank) may
accept deposits from NRIs, on repatriation basis subject to the following
conditions.

i)

The deposits are received under a public
deposit scheme.

ii)

If the deposit accepting company is a non-banking
finance company, it should be registered with the Reserve Bank and should
have obtained the required credit rating as stipulated under the guidelines
issued by Reserve Bank for such companies.

iii)

The amount representing the deposit is
received by inward remittance from outside India through normal banking
channels or by debit to the Non-Resident (External) Account or Foreign
Currency (Non-Resident) (Bank) Account maintained with an authorised
dealer/authorised bank in India.

iv)

If the deposit accepting company is a non-banking
finance company the rate of interest payable on deposits shall be in
conformity with the guidelines/directions issued by Reserve Bank for
such companies. In other cases the rate of interest payable on deposits
shall not exceed the ceiling rate prescribed from time to time under
the Companies (Acceptance of Deposit) Rules, 1975.

v)

The maturity period of deposits shall not
exceed 3 years.

vi)

The company accepting the deposits shall
comply with the provisions of any other law, rules, regulations, orders
issued by the Government of India or any other competent authority,
as are applicable to it in regard to acceptance of deposits.

vii)

The amount of aggregate deposits accepted
by the company shall not exceed 35% of its net owned funds.

viii)

The payment of interest net of taxes may
be made by the company to the depositor by remittance through an authorised
dealer or by credit to the depositor's NRE/FCNR(B)/NRNR/NRO/NRSR account
as desired by him.

ix)

The amount of deposits so collected shall
not be utilised by the company for re-lending ( not applicable to a
Non-Banking Finance Company) or for undertaking agricultural/plantation
activities or real estate business or for investing in any other concern,
firm or a company engaged in or proposing to engage in agricultural/plantation
activities or real estate business.

x)

The repayment of the deposit may be made
by the company to the depositor by remittance from India through an
authorised dealer or by credit to the depositor's NRE/FCNR(B) account
maintained with an authorised dealer in India, provided the depositor
continues to be a nonresident at the time of repayment. While applying
to the authorised dealer for remittance of maturity proceeds of deposit
or credit thereof to NRE/FCNR(B) account , the company should certify
that the amount of deposit was received either by inward remittance
from outside India through normal banking channels or by debit to the
depositor's NRE/FCNR(B) account, as the case may be.

xi)

The amount representing repayment of deposit
may also be credited to the depositor's NRNR/NRO or NRSR account, at
the depositor's option.

SCHEDULE
7

[ See Regulation 7(2) ]

Acceptance of deposits by Indian proprietorship
concern/firm or company (including non-banking finance company registered
with Reserve Bank) on non-repatriation basis from Non-Resident Indians
and persons of Indian origin resident outside India

A proprietorship concern or a firm in India,
may accept deposits on non-repatriation basis from NRIs, and a company
incorporated in India (including a non-banking finance company registered
with Reserve Bank) may accept deposits on non-repatriation basis from
NRIs/OCBs, subject to the following conditions :

i)

In the case of a company, the deposits
may be accepted either under private arrangement or under a public deposit
scheme.

ii)

If the deposit accepting company is a non-banking
finance company, it should be registered with the Reserve Bank and should
have obtained the required credit rating as stipulated under the guidelines
issued by Reserve Bank for such companies.

iii)

The maturity period of deposit shall not
exceed 3 years.

iv)

If the deposit accepting company is a non-banking
finance company the rate of interest payable on deposits shall be in
conformity with the guidelines/directions issued by Reserve Bank for
such companies. In other cases the rate of interest payable on deposits
shall not exceed the ceiling rate prescribed from time to time under
the Companies (Acceptance of Deposit) Rules, 1975

v)

The amount of deposit shall be received
either by inward remittance from outside India through normal banking
channels or by debit to NRE/FCNR(B)/NRO/NRNR or NRSR account. Where,
however, the deposit is made out of funds held in NRSR account of the
depositor, payment of interest as also the repayment of deposit shall
be made only by credit to NRSR account of the depositor concerned. In
all other cases, the maturity proceeds/interest shall be credited to
NRO Account.

vi)

The proprietorship concern/firm/company
accepting the deposit should comply with the provisions of any other
law, rules, regulations or orders made by Government or any other competent
authority, as are applicable to it in regard to acceptance of deposits.

vii)

The proprietorship concern, firm or company
accepting the deposit shall not utilise the amount of deposits for relending
(not applicable to a Non-Banking Finance Company) or for undertaking
agricultural/plantation activities or real estate business or for investing
in any other concern or firm or company engaged in or proposing to engage
in agricultural/plantation activities or real estate business.

viii)

The amount of deposits accepted shall not
be allowed to be repatriated outside India.

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